The USD traded in a sideways pattern on Wednesday as economic data from the U.S. proved negative and the stock markets turned in mixed results. The ADP Non Farm Employment Change numbers produced a figure of minus -371K, slightly worse than the anticipated -351K. Also the ISM Non Manufacturing PMI survey proved underwhelming coming in with a reading of 46.4, which was worse than the projected 48.1. However, Factory Orders data provided a better number with an outcome of 0.4%, beating the expected minus -0.7%. Today the weekly Unemployment Claims numbers are on schedule and are estimated to come in with a statistic of 587K, which would be above last week�s result. Today�s unemployment news will serve at the precursor for tomorrow�s important Non Farm Employment Change release.
The dynamics that we are seeing unfold within the USD have been led by the trading on the equity markets the past couple of months. Today and tomorrow�s trading will follow that path but the economic data could spark a wave of fresh sentiment onto Wall Street if there are any surprises. The crux of the debate regarding the economic conditions in the U.S. have to do with the timeline regarding how long it will take the employment and housing picture to improve. Optimists have been pointing towards stabilization and noting that the downward momentum has been greatly reduced, while �cynics� look at the economic data and speak about the dangers of a shrinking economy. The USD has been the recipient of pressure for nearly a month as equities have jumped in value but yesterday�s action from the likes of the Dow Jones and S&P may serve as a caution flag. Traders are likely to be a weary group as the jobless data begins to be published.
EUR:
The EUR effectively maintained its gains made in previous session yesterday but did find itself idling as traders essentially began to stand on the sidelines. The ECB will be holding their key interest rate meeting today. The European Central Bank will not change their rate today � if they did it would be a resounding shock � thus the focus will shift to President Trichet and his press conference. Investors will listen keenly to his outlook for the European economy and his insights as to how the continent is handling the downturn. Yesterday the Final Services PMI data was released for Europe and it came in just above expectations with a reading of 45.7 and Retail Sales figures produced a negative -0.2% result compared to the forecast of 0.3%. The EUR has gained well against the USD in the past month but the reasons it has done so may have to do more with speculative forces than fundamental factors. Traders will have to monitor both the ECB press conference today and the dollar centric news being generated on the other side of the Atlantic.
GBP:
In a busy day of economic data from the U.K. the Sterling managed to hold onto its gains. The Halifax HPI was finally released on Wednesday and turned in an increase of 1.1%, above the estimate of 0.7%. Both the Manufacturing Production and Services PMI data also produced better numbers than anticipated. Today the Bank of England�s MPC will release their interest rate decision and like the ECB is widely expected to leave the borrowing rates unchanged. Investors will be looking for any hints from the BoE regarding new quantitative easing policies and this could provide impetus into the GBP. The U.K. is still within the depths of a strong recession but the data released yesterday has provided more hope that a recovery may be possible, maybe not tomorrow or next month, but as the year concludes. However, there remains a long stretch of road to traverse for the economy to achieve �real� growth and that will be the focal point for some analysts who believe that more action is needed from the Bank of England. Like its counterparts, the U.K. faces the question of how much money it can afford to pump into the economy without causing long term problems. The Sterling has been an outstanding currency the past five months and will go into today�s trading with many interested observers.
JPY:
Once again the JPY and USD produced a rather uninspiring day of range trading. The pair has consistently been moving within a tight band for a while, this because both currencies are viewed as �safe havens� and as risk appetite has increased internationally the pair has languished. Gold maintained its rather lofty price on Wednesday staying above the 960.00 USD mark.
Technical Analysis
EUR/USD:
The pair is still floating within the bullish channel as the direction is unclear and no significant breach has been made, however both the daily and the 4 hour chart support a bearish correction. Waiting for a clearer signal before taking position will be preferable. Support level: 1.4360 Resistance level: 1.4490
GBP/USD:
On the daily chart the Slow Stochastic is crossing at the 79 level and the RSI is at the 85 level which indicates that we are in overbought territory. In addition the 4 hour chart also gives bearish signal. The preferred strategy today will be to wait for the correction and then take a short position. Support level: 1.6890 Resistance level: 1.7020
USD/JPY:
The pair has been extending its bullish movement, breaching the resistance level of 95.30. The daily chart also support the bullish trend as all the indicators are pointing up. Going long appears to be the preferable strategy. Support level: 94.50 Resistance level: 95.80
USD/CHF:
The hourlies show that the pair is in a bearish configuration as volatility is increasing, and showing bearish signals, the RSI and the slow stochastic supporting the continues of the bearish trend. Going short using the stop lost and take profit appears to be the correct strategy. Support level: 1.0590 Resistance level: 1.0720
The Wild Card
Crude Oil:
The crude oil is now floating with no distinct direction. Both the Daily RSI and the Slow Stochastic are floating in neutral territory. The preferred strategy today will be to wait for clearer signal before taking any position.
Support level: 69.70 Resistance level: 72.50.